British Pound

In a glimpse, there is a potential to downside than upside to these efforts, especially as far as the Pound is concerned. Furthermore, it will be difficult to rein in this program because of the perennial budget deficits of the government, which “must sell about 900 billion pounds of gilts over five years…The Bank of England will buy a third of these gilts.” The recent rise in government bond yields as well as the rising cost of bond insurance (i.e. credit default swap premiums) confirm that investors are growing increasingly nervous. According to a Harvard University historian, “The probability of a real sterling crisis is around one in three.”The BOE’s easy money policy makes the Pound an unattractive buy in the short term, while its QE program could stoke inflation in the long-term, without much benefit to the economy.